One of the most common questions asked by new investors has to do with the cost to build storage units. Several factors make it hard to give an easy answer to this question even though it seems simple. Of course, the more thorough your research, the better you’ll find an answer to this question. The location, required site improvements, zoning restrictions, and interior design features will all affect the cost to build storage units.
You can rephrase the question as “How much should I invest and what level of research can I conduct to ensure my self-storage business is successful?”
That being said, you’ll learn essential answers to your self-storage building cost questions in this post.
Cost to Build Self-Storage Facility
The land cost is typically between 25 and 30% of the total construction cost. With a 40% coverage at $1.25/gross square foot, the land net cost should be $3.13/rentable foot of the building.
The land is efficiently used in several markets by building multi-story storage with about two- to five-story facilities.
The rental rates in a market will determine the cost to build storage units in that location. Often, the average self-storage cost/operating ratio is equivalent to the apartment rental rates. Self-storage businesses can generate similar income to medium-priced apartment rentals within the same market. They can reach this income at about one-half the operating and construction costs.
“Whilst commercial occupants are often demanding shorter lease lengths these days, owning a self-storage facility is a lot more passive relative to residential investment,” comments James Durr of UK-based property auction company Property Solvers.
Costs to Build Storage Units
It would be best to determine whether you’re building a multi-story or single-story storage facility to plan the costs. Someone already wrote about self storage construction here.
Costs of Single Story Storage
Construction costs are typically between $25 and $40 per sq foot — excluding site improvement and land costs.
Multi-story self-storage facility costs can vary widely, ranging between $42 and $65 per sq foot. Currently, there are thousands of self-storage facility design options you can choose from to blend into your proposed area. The finishes and architectural details can significantly impact the cost, while site improvements and land costs also affect the initial investment.
A typical ultramodern self-storage facility will be between 60,000 and 80,000 net sq feet and cost about $45 to $60 per sq foot, excluding existing land costs. Its operating expenses (break-even) should be between 40 to 60 % of the total stabilized income (excluding debt service). A well-located and designed self-storage facility should successfully operate within an 80 to 95 % occupancy range, though there have been successful operations with as low as 70 percent occupancy rates.
Typically, it takes about 1½ to two years for several storage facilities to achieve their full income potential in competitive markets.
Every new business needs to attract customers — through Internet ads, mailers, billboards, or other methods. Irrespective of how you decide to market the storage business, plan around six to eight percent of the gross annual income for marketing.
If you’re unsure of your potential annual revenue, you can draw an estimate using this Self Storage Association statistics:
The average monthly revenue (net) for each climate controlled unit = $1.60 per sq foot.
The average monthly revenue (net) for each non-climate controlled unit = $1.25 per sq foot.
Storage units averaged about 90 percent occupancy rate in 2015.
If you’re looking to own a franchise of an already established storage company, you’ll avoid some marketing costs as the organization should already have a high reputation within the community. Note that you’ll still have to face royalties and franchise fees.
For instance, Prime Oaks, a storage company offering franchises, requires a $60,000 up-front fee plus royalties from each rental. Another franchise company, Zippy Shell, offers franchises at $45,000 but doesn’t state any royalty payment requirements.
Franchise fees and royalty payments will differ from organization to organization, so ensure to contact your preferred company directly to ascertain their exact requirements for opening a storage business in your locality in their name.
From the Self-storage Expense Guidebook, the average operating costs of self-storage units is $3.77 per sq foot. According to a construction company, the operational expenses range between $2.75 and $3.20 per sq foot, with varying numbers due to different salary costs. Climate-controlled units will also cause an increase in operating expenses.
Estimated Total Costs
The table below shows the storage units prices of a construction company:
|Estimated Development Cost||Cost Per Square Foot||Total Cost|
|Builder’s Risk Insurance||$0.04||$2,250|
Tips to Ensure a Profitable Self-Storage Business
We’ll now answer the second and more significant question. Self-storage is always a winner for a new business enterprise or investment. Without inventory overhead, staffing, or excess equipment for operations, you’ll have a relatively low barrier building a self-storage facility. But it’s a business—hence, you must evaluate it as would other businesses.
Fortunately, building storage units isn’t complicated. Here are some steps you can follow to access the market potential and plan for a new storage venture.
1. Find a property.
Ensure the property you find is in a good location.
2. Complete Your Market Analysis.
Understand your occupancy potential, competition, and the unique market requirements, such as Boat and RV Storage or Climate Controlled Self-storage, etc.
3. Calculate Your ROI.
Write down all your demographic, competitive information, estimated operational and start-up costs and ensure the figures show you can achieve the profit and revenue you need.
4. Contract an Architect.
Get an architect who understands the details you want to be included in the building design and the specific requirements of your permitting department.
5. Have a Construction Budget.
Get a professional storage construction company to draw a complete estimate and develop a site plan.
6. Secure Financing and Buy.
7. Pull Building Permits.
Understand how to navigate through the red tape and get a Self-storage Permit within the city.
Work with a professional storage building company that understands the storage business.
Design a website, pay for ads, and do some marketing online to promote your storage company.
10. Start Making Big Bucks.
With the rapid growth of the storage industry, now is the time to start your self-storage facility. Irrespective of the location or what type of self-storage storage business you need, this article can help you plan and understand the exact costs you’ll encounter in the course of building and operating your business.